WELLINGTON NOTES

Hokitika Guardian, 24 October 1924, Page 1

WELLINGTON NOTES

THE EXCHANGE POSITION.

(Special to “Guardian”.) WELLINGTON, October 22. Last week Mr William Watson, acting chairman of the Rank of New Zealand, made a statement respecting the difficulties of the exchange position, being driven thereto by criticisms of a misleading and mischievous character. He pointed out that the funds held by the Rank in London at tho present time, which were about £9,500,000,

were £5,000,000 more than was actually required for the conduct of the hank’s business in London, and on this money about half the interest was being earned compared with what could he earned if the credit could he transferred to New Zealand and be employed in the bank’s business in the Dominion. A northern daily pnpei commenting on the explanation pointed" out that the facts stated by Mr Weston completely confirm the contention “that the London accumulation lias been greatly reduced, and that if the exchange rates ruling when the surplus was at its maximum were economically justified, those levied upon exporters now arc excesivc.” The critics pointed out that the accumulations in London had reached £20,281,000 in 1920, hut this excited no comment from the then chairman of the Lank. Tho critic concludes by staling that Mr Watson propounds an entirely new doctrine, and flatly contradicts the statements of his predecessors that these funds are available for use in New Zealand whenever required, and an extract from tho Chairman’s speech in 1908 is given in the editorial. THE EXPLANATION. Mr Watson, on seeing the adverse criticism, was ready with a reply and a further explanation of the position. His previous statement was not as clear as it might have been, and lie points out that the writer in the northern paper had blundered in bis criticisms because lie failed to take

cognisance of the changed financial conditions. The conditions in 1920 were very different from what they are now. In 1920, owing to the war expenditure, the Imperial purchase of produce and the uncertaiuities of in-

vestment, the money at call deposited with the Rank of New Zealand in London was about 210,000,000 more than it is to-day. These temporary funds had to Ik: employed where they would he quickly obtainable were they needed and fetch tho best rate of interest. That it may be said is in accordance with sound hanking practice. In 1920 British Treasury Rills were yielding over (i per cent, while now tho best rate obtainable on Treasury Rills is only about L'.'l 12s (id per cent., and funds can be better employed in New Zealand, that is, a more remunerative rate of interest could he obtained by tile bank investing the money in New Zealand. Briefly stated the economic conditions in 1920 were such that money could be easily transferred to New Zealand ; there was no exchange problem then and Mr Watson says that the greater portion of a large sum held in London was subsequently transferred to the Dominion aL a profit to Hie hank, and this was effected when the large importations of 1921-22 took place. The policy of the bank and the principles of banking have not changed; the financial comlitions have alIcred and banking practice has been adjusted to fit the altered conditions. The exchange ‘problem between New Zealand and London cannot be considered apart from the financial circumstances of the Commonwealth, because Australia to a certain extent dominates the position in New Zealand. R is foolish of anyone not fully conversant with ail the facts and closely in touch with the actual operations of

exchange to attempt to criticise the policy of the banks, and to suggest that the banks are exploiting the exporters and producers through the operation of the exchanges is much to be deplored. A SQUEAL FROAI COAL. Colonel Ilolgate, the well-known coal magnate and chairman of the coalmine owner’s association, has pleaded for more coal—New Zealand coal—to be taken by the Railway Department. This department is importing large quantities of coal from New South Wales and so are other large users o! coal and the explanation is that it has not been found possible to make arrangements in New Zealand for the forward delivery ol largo quantities of coal required, not only for the railways but also for other large consumers. AY he li the coal miners refused to work there was no thought given to the public, and the greatest sufierers were the poor, and in AVellington scores of children had to be sent foragings the hills for brushwood and any sort of fuel they could find. Even now the retail price'of coal in AAellington for half ton lots is absurdly high. The present conditions arc not satislactorv to the consumer, but at least he can get a supply of coal and perhaps later prices will ease.